Valentino Rossi goes into Sunday’s MotoGP title decider in Valencia with his hopes of a 10th world championship in the balance after a court ruled he must start in last place.

The Lausanne-based court of arbitration for sport said in a statement it had dismissed Rossi’s application and upheld a stewards’ decision from last month’s Malaysian Grand Prix. “Valentino Rossi will commence the next (and last) event of the season... from the last grid position,” it said.

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Rossi leads his Spanish rival and Yamaha team-mate, Jorge Lorenzo, by seven points, with 25 for a win, before a finale that has been overshadowed by controversy since the last round in Malaysia.

The row started when Rossi tangled with Honda’s double world champion Marc Márquez at Sepang. Márquez said Rossi used his leg to make him crash, an allegation the Italian has denied while suggesting Márquez was trying to sabotage his championship bid and help Spanish compatriot Lorenzo.

Race stewards allowed Rossi to keep his third-place result in Malaysia but handed him three penalty points which, added to an earlier one, triggered an automatic demotion for Valencia. Cas said the arbitration procedure remained in progress and a final decision had yet to be made on the merits of the case.

The sanction has divided the sport, fuelled national rivalries and led to finger-pointing in both directions. The Italian prime minister, Matteo Renzi, called Rossi to express his support while his Spanish counterpart, Mariano Rajoy, took to Twitter to back Márquez.

Spanish media has compared Rossi’s actions to those of the Italian defender Mauro Tassotti who elbowed Spain’s Luis Enrique in the face in the quarter-finals of the 1994 World Cup. On the other side, Márquez filed a legal complaint after he and his family were allegedly insulted and physically attacked by Italian television reporters at their home near Barcelona.

Hundreds of thousands have also signed an online petition calling on MotoGP organisers to drop the Valencia penalty. Such has been the atmosphere that the International Motorcycling Federation (FIM) and promoters Dorna cancelled Thursday’s pre-race news conference and summoned riders “to address the situation”.

“The recent events have had a damaging effect on the staging of our competitions and poisoned the atmosphere around the sport,” said the FIM president, Vito Ippolito. “I express the hope that in Valencia the riders will fight it out on the track and in a way that fully respects the spirit of fair play.”